Carbon capture projects are too costly, have ‘questionable’ benefits, report finds

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Technology the oil industry is counting on to reduce emissions – carbon capture and storage – is too expensive and difficult to deploy quickly enough to help Canada meet its climate commitments, a global environmental think tank says.

Relying on carbon capture and storage (CCS) to cut greenhouse gases from oil and gas production will mean large public subsidies for projects that are unable to compete on costs against expanding renewable energy sources, rendering the benefits “questionable,” the International Institute for Sustainable Development said in a report released Thursday.

“The track record for CCS thus far just doesn’t line up with the emissions reductions we need to see, particularly between now and 2030,” said Laura Cameron, policy adviser for the Winnipeg-based institute’s energy team and co-author of the report.

“The cost is a big piece and that’s the focus of our research here – that CCS for the oil and gas sector is expensive, and despite the industry’s claims, we don’t see evidence that the costs are likely to come down in the short term,” Ms. Cameron said in an interview.

The technology is a cornerstone of the industry’s decarbonization plans, and touted as a way to promote Canadian fossil fuels as preferable to supplies from other countries while the world transitions to cleaner energy. Alberta is particularly enthusiastic, offering grants for projects integrating carbon capture and hydrogen production.

But companies have been slow to construct CCS projects to advance those aims, and proponents say that is a function of uncertainty over the future price of carbon and a more welcoming set of incentives available under the Inflation Reduction Act in the United States.

The Pathways Alliance, a coalition of major oil sands companies, is planning to spend $16.5-billion on CCS as the key pillar of a strategy to achieve net-zero upstream emissions by 2050. That would begin with a 22-million-tonne reduction in absolute emissions from those companies by 2030. The industry is counting on public money to foot a large part of the bill, and it is also seeking guaranteed minimum value for carbon credits to be generated under the country’s industrial carbon pricing system.

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Discussions on those guarantees appear to be bogged down, with the government – or the Canada Growth Fund, a new agency supposed to offer such contracts – worried offering such protection to a project of that scale is too risky, Reuters reported this week.

The institute says carbon capture costs have proven to be stubbornly high because of a number of factors. For one, projects are technically complex and often require customization to be retrofitted onto existing oil and gas facilities. Costs also depend on process type, carbon dioxide transport and storage location.

In Canada, only three projects have been developed in the oil and gas industry – two that produce hydrogen for use in bitumen upgrading and refining, and another venture tied to natural gas production. This means there is limited domestic experience and operating data available to scale, adapt and expand use of the technology to meet the country’s climate-related commitments, it said.

Another issue is the amount and type of energy to power CCS projects. The institute makes the distinction between CO2 captured and CO2 avoided, with the latter including emissions that stem from operating a CCS project.

“There is some research that shows up to a 20-per-cent increase in energy use with a CCS retrofit,” Ms. Cameron said. “Even if that is renewable, we need to weigh that against what that amount of renewable energy could be used for elsewhere. But often, it is fossil-fuel energy and that does increase the emissions.”

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Renewable energy, such as wind and solar, is already well-developed, generating revenue and expanding quickly, which lowers its overall costs. Expanding the use of renewables for electricity grids would be a better use of public funds, as those technologies will be used to 2050 and after, she said.

Alberta’s United Conservative government has taken the opposite approach, last month freezing new wind and solar project applications, partly to examine the impact on grid reliability, it said.

The institute says CCS does have a place in Canadian emission-reduction plans, notably in hard-to-abate activities such as cement and steel manufacturing, which will still be required through an energy transition.

“They have different needs than the energy sector. For decarbonizing oil and gas, we need to compare that to renewable-energy production. Whereas with steel and cement, we don’t see alternatives yet, so it is worth investigating and continuing to explore research and development of CCS in these applications,” Ms. Cameron said.